January 27, 2023

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- Fears of difficulty landing - E24

– Fears of difficulty landing – E24

New jobs numbers in the US are the “market driver” this week, but the lead is just as important, according to the chief strategist.

Danske Bank’s chief strategist Anders Johansen is waiting for a week with the US mark.
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– The most important thing this week is the “non-farm payrolls,” says Anders Johansen, chief strategist at Danske Bank.

The job numbers are often cited as the “most important of the month,” because they describe activity in the world’s largest economy.

A month ago, 200 thousand new jobs were expected, while the result was 261 thousand jobs. This time, too, 200,000 advances are expected.

It’s always difficult to say exactly how the market will react, but if the “non-farm” numbers come in strong again, it will be negative, says Johansen.

– Then there are also many things around him that are related to each other. We saw that inflation fell in the US CPI numbers a couple of weeks ago. So the question is what is happening with the labor market, and therefore it is interesting that there are also JOLTS numbers (Job Opportunities and Labor Turnover Survey), that is, how many vacancies there are.

Additionally, there is a change in employment at ADP on Wednesday, Johansen notes.

Fear of falling too low

– We presented our market outlook for next year on Friday, and we think there will be a recession in the US as well, says Johansen.

This is in line with the Conference Board’s Leading Economic Index (LEI), which fell 0.8 percent in October.

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The indicator aims to give signals about when the economy will reach peaks and troughs, and is called leadership because, among other things, the goal is to predict in advance when recessions will occur.

The recession in the United States is likely to begin at the beginning of the new year and continue until the middle of next year, the Conference Board estimated last Monday.

– We fear a hard landing, and central banks set up too much too quickly. Three times with 0.5 percentage points here. In the United States, they rose four times in a row by 0.75 percentage points. The last time this happened, says Johansen, was in 1994.

He notes that interest rate increases have a delayed effect on the economy, and that rapid increases will become apparent soon.

– We think we’ve more than slammed the brakes on enough, the question is when we’ll see it.

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A new sharp jump in the US central bank interest rate by 0.75 percentage points

– Now the market rate is 0.5 per cent, not the 0.75 per cent increase in the key rate in December. The Fed is expected to cut interest rates again near the end of next year, and more in 2024.

In the report to the Fed, which was released on Wednesday of this week, it became clear that more and more Fed Committee members are in favor of raising smaller amounts in the future. Chief Jerome Powell is probably the biggest hawk at the moment.

– You’ve been following all this fall, it’s what’s controlling the market all the way now, i.e. what’s going on with US interest rates.

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PMI in Norway

– In Norway, the DNB will release its November PMI figures on Thursday. Last month it rebounded again, but it has been trending lower in the previous months before that.

The Norwegian Industry Purchasing Managers’ Index (PMI) rose 2.9 points to 53.1 points (seasonally adjusted) in October, the DNB and the Norwegian Purchasing and Logistics Association (NIMA), which are in charge of the survey, show.

The level in October is the highest measured since July, and is well above 50, which is the difference between an increase or decrease in production.

It might be interesting to see how it goes. If October is a special month, it could drop below 50 again and confirm what has been seen for a long time, which is that the Norwegian economy is heading to a standstill now, says Johansen.

As I’ve been saying all fall, bad news is good news. We really want to see the central bank medicine work, but you’re also afraid it’s going to be really bad. Here one dreams of a certain kind of soft landing.

In addition, there are also inflation figures from many different places in the European Union, Johansen mentions.

– It would have been nice if they could soon show that they stop a little.